blur's focus on larger corporations starting to bear fruit

The slump in the value of the pound since the EU referendum vote has done no favours to blur, which reports in dollars, though it holds its cash in sterling

The group further developed its enterprise pipeline in the second quarter

The second quarter update for blur Group PLC (LON:BLUR), the enterprise services platform & marketplace operator, showed a continued improvement in the quality of revenues.

The group is focused on large enterprise customers, and this has led to “significant quarter-on-quarter improvements to EBITDA [underlying earnings], gross profit, costs, collections and cash burn,” chief executive Philip Letts told investors.

The company said that as a result of its enterprise strategy, higher margin revenues increased by 75% in the second quarter from the first quarter, driving a gross profit for the period.

Underlying cash burn during the quarter was down to US$1.1mln from US$1.5mln in the preceding quarter, excluding foreign exchange movements and the first quarter’s research & development tax credit of US$0.5mln.

The slump in the value of sterling since the EU referendum vote has affected blur's US dollar reporting, with the cash balance (held in sterling) taking an unrealised exchange hit of around US$700,000 over the first half of the year; however, as mentioned above, the group holds its cash deposits in sterling so the operational impact is negligible. At the end of June, cash stood at US$4.3mln, down from US$5.8mln at the end of March.

The reporting period saw a reduction in the number of projects kicked off and pitched on, but this was largely offset by an increase in the average project value, meaning that the total value of kicked off projects fell by just 2% quarter-on-quarter.

blur's operating efficiency continued to improve, driving a reduction in operating expenses of 22% in the second quarter (Q2), compared to Q1 2016 and by 41% compared to Q4 2015.

"The current macro-economic uncertainty means that cash optimisation, driven by better cost control, is moving to the top of the corporate agenda. This was highlighted by Deloitte's recent Q2 2016 CFO survey, with reducing costs and increasing cash flow being the top two balance sheet priorities for the first time in more than a year,” Letts said.

“Whilst we don't expect these trends to have an immediate impact on blur's revenues, over time we do expect an increasing number of large enterprises to prioritise reduction of their indirect spend,” he continued.

"While blur saw a reduction in project numbers in the quarter, the early phases of the group's relationships with larger corporates is characterised by longer sales cycles, together with wider variations in the volumes and values of projects. In Q2 we saw an increase in the average value of projects kicked off, meaning our total value of kicked off projects was broadly unchanged from Q1.

"Engaging with high quality, higher margin, repeating enterprise accounts remains blur's strategic focus and we are committed to becoming the indirect business services spend platform of choice for those customers. Achieving wider roll outs of our platform in these larger organisations is key to blur's path to sustainable profitability," Letts concluded.

In its interims, management undertook a full review of historic legacy agreements that led to a final US$721,000 final restructuring payment made against one agreement and an onerous contract provision on another resulting in a one-time write down for future expected losses of US$7mln with an associated US$4.1mln reduction in intangible assets to US$81.5mln.

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